Image courtesy of Flickr_Pink Sherbert Photography

Moving the 65-yard line

Sixty-five years old has long been considered a pivotal age. For example, the Office of National Statistics splits the labour market into two main categories: aged 16 to 64 and aged 65 and over.
Some concessionary prices are based on having reached age 65, which is still widely thought of as the age when men receive their state pension. However, 65 ceased to be the state pension age (SPA) – for men and women – on 6 December 2018. It is now somewhere between four and five months beyond 65 years. By 6 October 2020, SPA will have reached 66. Five and a half years later another
graduated change to increase it to 67 will begin, finishing in April 2028.
Coincidentally, those National Statistics on employment show that more than one in ten people aged 65 and over are in work and the numbers have been gradually but consistently increasing over the past 12 months. If this year’s summer holiday makes you dream of retirement, don’t get ahead of yourself. You might well be working beyond 65.

PK Partnership Budget Savings and Pensions

How much is enough for pension contributions?

Pension contributions have recently risen for many people, but the increase may still not be enough to fund a comfortable retirement.

 

he latest round of pre-planned increases to minimum contribution rates under automatic enrolment (AE) workplace pensions came into effect in April. If you are one of the 10 million people who have been automatically enrolled, then broadly speaking, provided your yearly earnings are at least £10,000:

■ Your employer must now contribute a minimum of 3% of your ‘band earnings’ into a pension (band earnings in 2019/20 are between £6,136 and £50,000); and

■ You must make up the balance to bring the total contribution to 8% of ‘band earnings’.

So, if your employer pays the minimum 3%, you have to contribute 5%. In most instances you will receive at least basic rate tax relief, which will bring your effective cost down to 4%.

The 8% total contribution figure is widely quoted, but a lot of people overlook the fact that it does not apply to all earnings. In fact, the true AE contribution is approximately 6.2% of total average pay – based on the O¬ ce for National Statistics’ latest (February) estimate of average pay of £528 a week (£27,508 a year). There are similar e ects across the pay scale, with the maximum true rate of contributions approximately 7% of total pay, which is at the ‘band earnings’ ceiling of £50,000.

CURRENT CONTRIBUTIONS ARE NOT ENOUGH

Despite the increases, the government accepts that the current level of AE contributions falls far short of funding requirements. In the foreword to a Department for Work and Pensions report on the future of AE pensions, Secretary of State for Work and Pensions said,

“…we recognise that contributions of 8% are unlikely to give all individuals the retirement to which they aspire”. His proposals included:

■ Removing the lower limit on ‘band earnings’, so that the 8% was based on full earnings (up to £50,000);

■ Reducing the minimum age for inclusion in AE from 22 to 18; and

■ Encouraging people to save more than the 8% level.

Eighteen months (and two new Secretaries of State) later, there have been no further developments. The fact that there have been AE contribution increases in both April 2018

and April 2019 may well have encouraged the government to pause, if only to see the reactions of employees.

WHAT IS THE SHORTFALL?

So how much should your pension contributions be?

As far back as 2005, the Pensions Commission acknowledged that the state pension with additional AE contributions of 8% would only provide around half the level of savings needed for most people to enjoy an adequate retirement. The implication is that the contribution rate should more than double for the average employee.

More recent statistics on longevity and the number of people remaining in work beyond usual retirement age have made the picture even more complicated. But how much should your contribution levels increase? The amount will depend on several factors including:

■ When you plan to retire and whether that is before you reach your state pension age;

■ Your existing level of pension savings, including state benefits;

■ Other savings on which you can draw in retirement; and

■ Any limits imposed on you by the pension annual and lifetime allowances.

The calculation can become complex very quickly, so why not ask us to carry out an assessment of what your personal contribution rate should be?

The value of your investments and your income from them can go down as well as up and you may

not get back the full amount you invested. Past performance is not a reliable indicator of future

performance. Investing in shares should be regarded as a long-term investment and should fi t in with your overall attitude to risk and financial circumstances.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.

 

 

 

PK Partnership Mortgage

Dividends riding high, but…

The value of regular dividend payments has increased steadily after the financial crisis of 2008.

Dividends paid out by UK-listed companies through to 2018 rose by 85%, with £19.7 billion paid out in the first three months of 2019 – a first quarter record according to Link Asset Services. In May, however, a number of high profile companies, including Vodaphone and Marks & Spencer, slashed their dividends by 40%, creating a less rosy picture.

Companies usually pay regular dividends quarterly or twice a year, as one interim and one final payment. You don’t have to be a direct shareholder to benefit – dividends are also paid to many pension and ISA funds.

The impact on both institutional and individual shareholders means companies are reluctant to cut their dividends, even when it may make economic sense to do so.

The record figures this year have been attributed to several one-o ‘special’ dividends.

For example, the global resources company BHP Group paid a huge £1.7 billion special dividend, following the sale of its US shale oil interests. But even excluding these, regular dividend payments still rose 5.5%, to £17.6bn prior to the cuts in May.

Many of the largest companies listed on the UK stock market are global conglomerates. The low value of the pound has also helped boost profits, once overseas earnings are converted into sterling, and this has helped push up dividend payments.

Choosing Carefully

Given the general history of consistent gains, it is not hard to see how dividends can help boost overall investment returns. Those looking for dividend payments might want to consider equity income funds, which aim to invest in companies that have a track record of growing their dividend payments.

Established oil giants, utilities, pharmaceutical, tobacco and financial companies have traditionally had good track records for paying dividends, although there’s no guarantee these will continue. It’s worth noting that many banks stopped paying a dividend following the financial crash, although a number have now reinstated these payments.

In contrast, smaller, fast-growing companies often pay low – or no – dividends, as surplus profits tend to be reinvested in the business.

Dividend Reinvestment

Many investors choose to reinvest their dividend payments to benefit from higher compound returns – reaping a further investment return on their investment return.

This can significantly increase the value of holdings over longer periods of time.

Dividends can be a useful way for investors to earn an attractive income from their investments without having to dip into their capital.

As so often in investment decisions, the devil is in the detail, now more than ever, so sound advice is crucial.

The value of your investments, and the income from them, can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.

Investing in shares should be regarded as a long-term investment and should fi t in with your overall attitude to risk and financial circumstances.

 

PK Partnership Budget Savings and Pensions

How to stay cool during the heatwave

Today (25 July 2019) is expected to be the UK’s hottest day on record, with temperatures of up to 39C (102.2F) forecast in southern England.

Thousands of commuters are being affected by disruption in areas where trains are running a slower speed on tracks at risk of buckling, with some rail firms advising passengers not to travel.

Here are our common sense top tips to stay cool:

Skin protection

Sunburn is a real possibility and applying the right skin protection is essential. Fair-skinned individuals should slather on as high a factor sun cream as they can get, but others cannot afford to be complacent either.

Hydration

Drinking lots of water is essential. If you’re sweating, you’ll need to keep regularly topped up on fluids in order to avoid dehydration.

Iced water is particularly refreshing during the summer and fruit juice is good too, especially as the sugars will give you a bit of an energy boost in the sapping sunshine.

Remember alcohol will not keep you hydrated, so as lovely as a cold pint is on a summer’s day, make sure you also drink water or a soft drink and don’t overdo it!

Prepare your home

If you are not lucky enough to have air conditioning at home, the summer months can be a bit of an ordeal as you try various new tactics to keep cool. Throwing open all the windows as far as they go is a good start, but unless there is a breeze in the air this isn’t likely to make a difference.

Make sure you’ve swapped your duvet to a thinner one with a lower tog rating or simply sleep with a sheet, as otherwise sleep may be hard to come by on warm nights.

Fans are essential during the summer and it is worth investing in some really high quality ones, as the cheaper ones will often only push warm air around the room and won’t provide any benefit.

Clothing

Plenty of individuals like to flash the flesh in the sun but this won’t necessarily help keep you cool. The best clothing to wear in the summer is light, breathable material such as cotton, as this will be the most comfortable when the temperatures really start to get unbearable. Wear light colours, as dark ones absorb heat.

 

Image courtesy of Flickr_Sheila Sund

Planning: The joy of tidying

Prioritise peace in your life: extend the Marie Kondo tidiness craze from your home to your finances.

Have you ever looked at a room in your home – or even at your office desk – and wondered how you accumulated so much stuff? You might well remember when you acquired each item, but the questions of why you did so and whether you still need it can be more awkward to answer. ‘Seemed like a good idea at the time’ and ‘No, not really’ could be the embarrassing truth for many of us.

What applies to the curiously coloured article of clothing or the novelty mobile phone holder can also be relevant to excess baggage in your personal finances. Working out what investments, savings and insurance cover you have, why each one is there and whether you still need it can be a daunting, but ultimately rewarding task. For example:

  • Do you have any old ISAs – perhaps they were even once PEPs – bought for their league table-topping funds and then forgotten when past performance proved to be no guide to the future?
  • Do you have cash invested in bank or building society accounts opened more than a couple of years ago?
  • Are your investment funds held on a single platform or spread across several platforms, or are any of your funds held directly with the asset managers?
  • Do you have any pension plans where contributions have long since ceased and perhaps the provider has closed to new business?

We can help create some coherence to your finances. The process can have a range of benefits, even if it is simply to bring your investment funds under a single umbrella. Charging structures now often favour bringing together holdings in one place rather than spreading them over several providers or platforms.

A consolidated approach can also make it easier to see the bigger picture and carry out any necessary adjustments. For cash deposits, Financial Conduct Authority research from 2018 showed that accounts that were more than two and half years old typically paid less than half the interest rate offered by newly opened accounts.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fi t in with your overall attitude to risk and financial circumstances.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.

 

Pagani-Huyara-PK-Partnership-Insurance-Broker-1024x768

Insuring the Gumball Rally – Mykonos to Ibiza 2019

Gumball Rally

 

PK Partnership have recently arranged the insurance for many of the cars that took part in this years Gumball 3000 Rally. Registration began in Mykonos where we met with the drivers of 120 supercars!

 

As the official insurance partner to Gumball 3000, PK Partnership had quoted and put on cover many on the drivers before the start, but inevitably there were going to be a few that required last minute specialist insurance cover. The correct insurance cover is a strict stipulation for the rally by the organisers of Gumball 3000.

 

 

Aston Martin DBS PK Partnership Insurance Broker

 

As many of you will know, the cars taking part in this rally are largely high end, prestigious supercars and the most expensive car on the rally this year was a Pagani Huayra with a market value of £2.75M.

 

 

 

Document Wallet PK Partnership

 

The rally travelled through 10 countries over 3000 miles, finishing in Ibiza, with the longest day being from Porto Montengro to Venice – some 950km and 13 hours – and 950km of driving!

Our Director Amit Patel drove an Aston Martin DBS Superleggera as part of Team Blain.

 

 

 

Team

 

 

The team at PK Partnership are already planning the insurance risk aspect of next year’s rally. Stay tuned for more! You can see more photos on our Instagram page at www.instagram.com/pk_partnership

 

Image courtesy of See-ming Lee SML, Flickr

Attending Europe’s largest insurance conference

Earlier this month we attended the 2019 British Insurance Brokers Association conference in Manchester, where we met with leading insurer partners and forged many new relationships.

The BIBA conference is a great way for us to meet with specialist insurers and claims providers all under one roof to continually enhance our client offering.

The event is Europe’s largest insurance conference, entitled “Leading the Way”, and Boris Johnson was the keynote speaker on Thursday morning announcing that he will be running for Prime Minister.

Thank you to our friends at Hiscox for the evening entertainment – we are looking forward to next year’s event already!

biba amit

 

 

 

 

 

 

 

 

 

 

Director Amit Patel pictured at the entrance to the conference

 

Image courtesy of Flickr_Sheila Sund

Self-employed pensions boost

The Chancellor has abandoned plans to abolish class 2 national insurance contributions (NICs).

Those registered as self-employed pay class 2 NICs if their profits are more than £6,365 a year in 2019/20. Then if profits exceed £8,632, they also have to pay class 4 NICs.

Typically, these NICs are paid through the self-assessment system.

The planned abolition of class 2 NICs was proposed to simplify the tax system.

But there were concerns it would push up pension costs for the self-employed, particularly those on lower incomes.

For 2019/20, the class 2 NIC is £3.00 a week. Class 4 NICs are 9% of their profits (between £8,632 and £50,000 for 2019/20) then 2% of profits above this level. Paying class 2 NICs gives the self-employed access to the new state pension, which is worth up to £168.60 a week in 2019/20 – depending on their NIC record.

But relying solely on the state pension in retirement isn’t a sensible idea. It’s important to make some private pension provision as well. You won’t have the benefit of a workplace scheme or employer contributions – but that shouldn’t stop you building up your own retirement savings.

Registered pensions are a really tax-efficient way to boost your income later in life.

The Financial Conduct Authority does not regulate tax advice. Tax laws can change. The value of tax reliefs depends on your individual circumstances. The value of your investment, and any income from it, can go down as well as up and you may not get back the full amount you invested.

 

PK Partnership Budget Savings and Pensions

Travel Insurance and Sri Lanka

You may have already read that the Foreign and Commonwealth Office (FCO) advise against all but essential travel in light of the ongoing security operation and heightened risk of terrorism in Sri Lanka following the tragic attacks on Easter Sunday.

Anyone with plans of travelling to Sri Lanka in 2019 is strongly advised to contact their holidaymaker.  Given the severe travel advice warning, we suggest checking all travel insurance details.

It is always advisable to check information from the FCO web site before international travel and how this may impact your insurance arrangements.

If you have any specific queries relating to your travel insurance before travelling please do contact us.

 

Image Courtesy of Flickr_Ishan Manjrekar

Ringing the changes of the new tax year

The tax year 2018/19 ends on Friday 5 April, which means it’s time to start planning for the new tax year and tie up the loose ends of the old one.

Planning for the new tax year is now affected by the shift of the Budget schedule to autumn. The result is that changes announced in October, or in Scotland’s December Budget, have now passed into legislation in time for the new tax year. So, what does 2019/20 hold in store?

A higher personal allowance

The first £12,500 of income for most people in the UK will be free of income tax from 6 April 2019.

An increased higher rate threshold, outside Scotland The higher rate income tax threshold (the personal allowance + the basic rate band) will rise to £50,000 for England, Wales and Northern Ireland. This considerable jump of nearly 8% could mean it is worth reviewing how married couples and civil partners own their investments to ensure income falls into the right hands. In Scotland, the threshold stays unchanged at £43,430.

An increased national insurance contributions (NICs) upper threshold

The UK-wide upper threshold for full rate NICs (12% for employees) will also increase by nearly 8% to £50,000 from 6 April, potentially clawing back some, or in Scotland, almost all of your income tax savings. However, the increase does offer more scope to potentially gain benefits from salary sacrifice arrangements for pension contributions.

Personal pensions

The lifetime allowance will rise by almost £25,000, to £1.055 million, for 2019/20 – roughly enough to buy a 65-year-old a guaranteed inflation-proofed income of around £34,000 a year, based on current annuity rates. The annual allowance and its associated taper limits remain unchanged. So it’s all the more important to check whether you have any unused allowance from 2015/16 to carry forward before 6 April arrives, given you can only carry forward the previous three tax years, and the opportunity disappears.

Employer pensions

The minimum level of pension contributions for automatic enrolment increases from 6 April 2019. For employers, the minimum rate rises from 2% to 3% of ‘band earnings’ (£6,136–£50,000 in 2019/20), while employees must pay enough to bring the total up to 8% including tax relief. As the band’s upper limit has risen in line with the NIC upper threshold, there is a double sting if you earn above £46,454.

Individual Savings Accounts (ISAs)

Only the Junior ISA investment limit will increase in 2019/20, and that by only £108 per year. It will be the third successive year the overall ISA limit has been fixed at £20,000, a reminder of the wisdom of contributing as much as you can each year (including 2018/19, if you have not already done so). One popular ISA variant, the Help-to-Buy ISA, will disappear for new investors (aged 16 upwards) from December 2019.

Capital gains tax (CGT)

The CGT annual exempt amount increases to £12,000 in 2019/20. The new annual exempt amount could result in a potential tax saving of up to £2,400 (£3,360 in the case of residential property). If you have not used your 2018/19 exemption, combining the two with sales straddling the tax years could remove £23,700 of gains from tax. That might provide the funds to top up ISAs and pensions.

For more information on any of these changes please contact us now.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice. The value of your investment, and any income from it, can go down as well as up and you may not get back the full amount you invested. For specific tax advice please refer to your tax specialist or accountant.

 

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